Why the 99% May Never Retire

Economists say that we're in a recovery, but try telling that to ordinary middle-class Americans. As hard as it is to make ends meet right now, Americans are extremely pessimistic about ever getting to retire with any kind of financial security.

A recent survey from Wells Fargo (WFC) highlighted the current plight of the 99%. Among 1,000 people who responded to the survey, more than half were most concerned day-to-day simply with finding money to pay their monthly bills. Understandably, that has pushed less pressing needs like saving for retirement onto the back burner -- only a sixth of respondents said it was a key concern for them right now.

But while they may not be in a position to make retirement saving a priority, middle-class Americans are still worried about it.

Three in 10 believe they'll have to work to age 80 or beyond in order to have a comfortable retirement, though most of them admit their job prospects at such advanced ages are poor. More than two-thirds believe they'll work part-time during their retirement years, and a substantial fraction of them predict it won't be because they want to, but because they'll need to in order to make ends meet.

Dangerous Misperceptions

Perhaps most troubling about the survey, though, were the disparities between the amounts that most people think they ought to save versus what they're likely to need.

For instance, the survey found that most people believe they'll only need about $47,000 to cover their overall out-of-pocket health-care costs in retirement. Yet estimates from multiple sources, including Fidelity and the Center for Retirement Research, put the true number closer to a $250,000 -- more than five times what people expect.

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In addition, people may be overly optimistic about their ability to live on limited income. A third of those surveyed said that they think a sufficient retirement income would be half or less of their current income. Although retiring does reduce some of your costs, other expenses tend to go up. As a result, most financial planners suggest planning to replace closer to 80%-85% of your pre-retirement income in order to retire comfortably.

Post Economic-Crash Stress Disorder

The other big problem facing middle-class Americans is a lack of attractive options for growing their money.

Even four full years after the financial crisis struck, and with the stock market nearing pre-recession highs, fully 70% of those surveyed believe that the stock market isn't an ideal place to invest for retirement.

Even more troubling is the tendency of younger investors to steer clear of the market. When asked how they would invest $5,000, only 18% of those aged 25 to 29 would put it in stocks, compared to 37% of those in their 30s and 24% overall.

By contrast, 40% of middle-class Americans would put a retirement savings windfall in a CD or savings account, though those pay only minimal interest that isn't nearly enough to keep up with inflation and taxes -- making them, essentially, safe ways to lose money slowly.

Do Not Go Blindly Into the Future

What these numbers should tell you is something that the survey's results emphasize: Large numbers of people don't know how to plan for retirement and need as much guidance as they can get.

Three-quarters of those surveyed likened their thoughts about how much money they should save for retirement as "some sort of guess;" only a small fraction based their long-term investing strategy on reasoned calculations.

Although the bulk of Americans think that employer-sponsored 401(k) plans are the best available way to save for retirement, the vast majority believe that employers should provide personalized advice to help them figure out which investments are best for them.

There's one area where the 99% aren't under any illusions: Despite expecting contributions from Social Security and, in some cases, employer pensions, it's clearer than ever to most of us that if we want to retire comfortably, it's up to us to figure out how to make it happen.

For The Motley Fool's free report on how to boost your Social Security payouts by as much as 76%, click here. Motley Fool contributor Dan Caplinger owns warrants on Wells Fargo. The Motley Fool owns shares of Wells Fargo. Motley Fool newsletter services have recommended buying shares of Wells Fargo.